Late August yielded one of the fastest drops in hog prices ever, and the lowest August price levels since 1971. The decline was brought on by large slaughter runs – 1.96 million hogs for the week ending Aug. 24, and 2.01 million hogs for the week ending Aug. 31. Marketings exceeded 2001 levels by 8.2 percent in a three-week span by late August and early September. More than 300,000 hogs went to slaughter that were not anticipated by USDA’s June Hogs and Pigs Report.

Those large marketings this early in the year could mean one of two things, which could yield very different price pictures through year’s end. The first and most favorable situation for producers is that hog marketings have been pulled forward, drawing as many as 500,000 head of hogs out of the fourth quarter.

If that is the case, fourth-quarter prices may be similar to the third-quarter and average about $30 per hundredweight, says Glenn Grimes, University of Missouri agricultural economist.

Some evidence indicates hogs were marketed early, says Grimes. Slaughter weights for 79 percent of the hogs sold in August were 1.3 pounds less than in 2001, says Grimes. The other 21 percent of the hogs were 1.7 pounds heavier than a year ago, which Grimes attributes to marketing contracts that shift the price risk away from producers.

Sow slaughter also was up. For the four weeks ending Aug. 24, sow slaughter was up 19.3 percent from the same period in 2001, and gilt slaughter has been 1 percent higher. Grimes believes producers are reducing the breeding herd at a healthy rate.

The other scenario is much darker. If the June Hogs and Pigs report did miss more than 300,000 hogs, it’s possible that 2 million head per week hog runs could continue for much of the year. If this scenario is true, prices will likely test 1998 levels or below. The cash market could reach single-digits and some analysts have predicted an average fourth-quarter price of about $15 per hundredweight, if slaughter remains around 2 million head per week.

USDA reports have been underestimating hog marketings for most of the year, so it’s possible it could continue. Between the challenge of accounting for Canadian feeder pigs and sample error, USDA’s reports tend to underestimate rather than overestimate slaughter numbers.

In all likelihood, some marketings have been pulled forward, and USDA’s report has underestimated hog marketings. What percentage of those two scenarios dominate is the big question that will determine how low fourth-quarter hog prices fall.